Millions set to save $412 a year after Sunak’s announcement

tax cut

Chancellor Rishi Sunak described the move as the single biggest tax cut for a decade

Millions of people across the country are set to save over £330 ($412) a year following an announcement from Chancellor Rishi Sunak.

In a statement regarding the Spring Statement it was revealed that the National Insurance Contributions starting threshold will rise by £3,000 to £12,570 ($3,745 to $15,695) next month – meaning workers will be keeping more of what they earn before paying personal tax.

Sunak described the move as the single biggest tax cut for a decade. The cut, worth over £6 billion ($7.49 billion), will benefit almost 30 million working people with a typical employee saving over £330 ($412.05) in the year from July 6, The Daily Record reports.

At the time, Sunak said: Around 70 per cent of all workers will have their taxes cut by more than the amount they’ll pay through the new levy.

It means that employees will now start paying National Insurance on earnings above £12,570 ($15,695) a year – up from the original £9,880 ($12,336) planned for April and will see some of the lowest earners not have to pay the tax.

But, it’s worth remembering that the Health and Social care levy came into effect in April – 1.25 percentage point increase on National Insurance Contributions – designed to support the NHS across the UK.

The Chancellor had been under pressure to scrap the increase in the face of the rising cost of living crisis, but instead opted to soften the blow by raising the threshold at which people start paying National Insurance.

However, by lifting the threshold, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, warns that care must be taken that workers earning less than £12,570 ($15,695) per year do not lose access to vital National Insurance credits (NI) for their State Pension.

Helen explained: Ordinarily a worker should receive an NI credit even if they earn below the threshold as long as they have earnings of more than £120 ($149) per week or £6,240 ($7,791) per year but it’s worth checking to make sure this is the case. The State Pension forms the backbone of most people’s retirement and therefore, they should ensure they do not incur gaps unnecessarily, which means they end up with less in retirement.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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